Corporate - Branch income
The income tax rate on branch profits is the same as on corporate profits. In general, profits
remitted abroad by a branch office are subject to a 15% tax rate, based on the total profits applied
or earmarked for remittance, without any deduction for the tax component thereof. A lower rate
may apply under certain tax treaties. Profits from qualified activities remitted by a branch
registered with the Philippine Economic Zone Authority (PEZA) are tax exempt.
Branch Office
Like a representative office, a branch office is an extension of the foreign/head office, and
does not acquire a separate juridical personality from the latter.[7] Thus, the liabilities of
the branch are considered liabilities of the foreign/head office. Also, a branch office may
be set up with only one (1) person who will act as the resident agent
From the point of view of taxation, the foreign corporation, upon obtaining a license to do
business through a branch office, becomes a resident foreign corporation.[8] A branch
office is, thus, subject to income tax at a rate of thirty percent (30%) on income from within
the Philippines.[9] However, profits remitted by the branch to its head office are subject
to branch profit remittance tax, if they are effectively connected with its business in the
Philippines, at the rate of fifteen percent (15%) or ten percent (10%) depending on certain
tax treaties; however, if located in a special economic zone, then they are tax exempt.
A branch office is not subject to documentary stamp tax (“DST”) simply because it does
not issue shares of stock. A branch is also not liable to pay the ten percent (10%)
improperly accumulated earnings tax. Subject to certain conditions, overhead expenses
of the foreign/head office may be allocated to the branch office.[10]
As a fully foreign-owned entity, a branch must have a capitalization of at least US Dollars:
Two Hundred Thousand (US$200,000)[11], unless the branch will be exporting goods or
services or generating revenue from abroad amounting to more than sixty percent (60%)
of its gross sales. It can be fully foreign owned, as it is considered an Export Enterprise
under the Foreign Investments Act.[12]
Hence, the branch can be registered with as little as Philippine Pesos: Five Thousand
(PhP5,000.00) as paid up capital. However, most banks require Philippine Pesos:
Twenty-Five to Fifty Thousand (PhP25,000.00 – PhP50,000.00) to open a corporate bank
account.
Note that a branch is required initially to deposit with the SEC, for the benefit of present
and future creditors, acceptable securities with market value equivalent to at least
Philippine Pesos: One Hundred Thousand (PhP100,000.00) plus an annual additional
deposit of Two Percent (2%) of the amount by which the branch office’s gross income
exceeds Philippine Pesos: Five Million (PhP5,000,000.00).
An application for registration of a branch office with the SEC requires the following
documentary requirements:
1. SEC Form 103 (Application of a Foreign Corporation to Establish a Branch Office
in the Philippines). This application may be signed by any person authorized by
the applicant’s Board of Directors.
2. Proof of inward remittance of a minimum amount of US Dollars: Two Hundred
Thousand (US$200,000.00) such as bank certificate. The initial assigned capital
shall be remitted directly to the Treasurer-in-trust account opened for and on
behalf of the branch office, spate from any remitted filing fees.
3. Latest audited financial statements of the foreign corporation.
4. Authenticated Articles of Incorporation, By-laws or similar documents of the
foreign corporation.
Note that all documents executed abroad should be authenticated by the Philippine
Embassy or Consular Office at or nearest the place of execution. SEC filing and legal
research fees for the above application will amount to at least US Dollars Two Thousand
Twenty (US$2,020.00).
Within sixty (60) days after obtaining the license to operate, the branch office is required
to deposit marketable securities worth at least Philippine Pesos: One Hundred Thousand
(PhP100,000.00) with the SEC, which may be withdrawn upon cessation of the Philippine
branch’s operations.
LIST OF FOREIGN BANKS